News

Chipotle's digital sales up 100%

April 25, 2019

It's safe to say that Chipotle has recovered from its sales slump brought on by past food-safety issues. The chain reported Thursday that comparable restaurant sales increased 9.9% during Q1, ending in March. One standout stat included a bump in digital sales; they grew 100.7% and accounted for 15.7% of sales for the quarter.

"This is the fifth consecutive quarter of accelerating comps, which reinforces our view that when we connect with guests through culturally relevant marketing focused on Chipotle's great taste and real ingredients, and provide more convenient access with less friction, they respond enthusiastically," CEO Brian Niccol said during Wednesday's earnings call.

For its first quarter ended March 31, 2019, the chain reported the following:

• Revenue increased 13.9% to $1.3 billion
• Comparable restaurant sales increased 9.9%, net of 30 bps from loyalty deferral, and included 5.8% of comparable restaurant transaction growth and 2% in mix contribution.
• Restaurant level operating margin was 21%, an increase from 19.5%.
• Diluted earnings per share was $3.13, net of a $0.27 after-tax impact from expenses related to restaurant asset impairment, corporate restructuring, and certain other costs, a 46.9% increase from $2.13. Adjusted diluted earnings per share excluding these charges was $3.40, a 59.6% increase from $2.13.
• Opened 15 restaurants and closed two.

It's all about the digital
Through a combination of delivery, order ahead and catering, the chain's digital sales accelerated from Q4 and grew nearly 101% year-over-year and quarter one. Digital sales totaled $206 million during the quarter.

"We also relaunched a new chipotle.com website in February that's helping increase customer conversion," Niccol said. "We are pleased to be averaging more than 1 million digital transactions per week."

Lifestyle Bowls, the chain's first digital-only menu innovation that launched Jan. 2, also resonated with consumers.

"In fact, during the first few days, it generated over 1 billion earned media impressions," Niccol said. "Later in the quarter, we extended the lifestyle menu platform with plant-powered options highlighting our Sofritas and vegetarian bowls."

Another digital win for Chipotle was rolling out is rewards platform in March; it already has 3 million members. 

"In addition to allowing us to reward and thank our guests, we are beginning to gather data that can be used to more effectively target them to engage and grow their loyalty," Niccol said. "The rewards program gives us a currency that we can use in set behaviors and is a key part of our digital system flywheel."

The rewards platform will provide top spend toward the chain's digital system, which included order ahead, delivery, catering, digitize second make lines, mobile order pickup shelves, Niccol said.

"These self service shelves are a key element in digitizing and modernizing our restaurant experience as they increased access, speed of service and convenience for our guests, while building more love for Chipotle and driving digital sales," he said about the shelves, which also help improve delivery times. "The delivery driver no longer waits for orders when they enter our restaurant. They simply go straight to shelf, select the appropriate order and head off to the delivery destination. We feel this is a competitive advantage and allows us to have industry-leading delivery times. I want to thank our teams for the great execution on this initiative."

Lastly, Niccol touched on the importance of driving awareness of the brand through a holistic media plan with national TV advertising as well as social media.

"Collectively, these marketing efforts help drive culture, drive a difference and ultimately drive its Chipotle purchase," he said. "Those efforts combied with the digital marketing, contributed to the lift in Q1 sales as evidenced by digital impressions increasing 300% year-over-year and social impressions increasing 400% year-over-year, Niccol said.

Outlook
For 2019, management is anticipating the following:

• Mid to high single digit comparable restaurant sales growth, up from the prior mid-single digit growth expectation.
• 140 to 155 restaurant openings